Quick Guide to Marketplace Metrics
What Are Marketplace Metrics?
Exploring the buying habits of consumers is a fascinating occupation. While the 'old world' faced many difficulties with understanding customers, internet marketplaces are an excellent environment for this activity.
With the development of internet-based marketplaces, recording customer behavior, following transactions, and building trust have become much more accessible. Marketplace metrics help behavioral economists and marketplace owners gather a large amount of data. They use the stats to understand customers and grow the business even more efficiently.
Why Is it Important?
Every business defines goals and KPIs in some shape or form, but they are nothing if you don't track progress.
Here at SaaSHolic, we've gathered a comprehensive guide to the different marketplace metrics categories. Each type serves an essential aspect of your business:
Website metrics are crucial for learning what a user does on your website
Business metrics help you account for your bottom-line
Transaction metrics show you the activity and relationship between buyers and sellers on your platform
User satisfaction metrics help you define the areas you can improve around customer service and overall marketplace performance
Marketplaces are very different and work with an array of various products and services. We recommend you view our list as a guide but use your company's vision to choose the most relevant ones.
15 Metrics to Follow
Website Metrics
Have you ever looked at your website's Google Analytics? Have you implemented a heatmap to learn where a customer clicks? Have you identified what messes up the customer's journey? Website statistics will help you tweak the UX and content of the platform for better results. Here are a few metrics in this category.
1. Monthly Active Users (MAU)
The number of monthly active unique users is an excellent indication of marketplace growth. Following this data point will help you adjust the marketing and customer acquisition strategies.
2. Bounce Rate
The bounce rate shows what percent of your customers leave the site after viewing only one page. The number needs to be low to indicate that buyers are interested in your website. Ideally, they should visit more than one page, searching for the required product.
However, the bounce rate also depends on other factors. Say, you placed an ad for shoes on sale. When the user follows the ad, they might not be interested in other products except the one from the ad. While thinking about the bounce rate, you need to consider the visit’s source and its page.
3. Time Spent on Site
Tied with bounce rate, time spent on site is a multi-faceted, yet fun statistic to follow. The longer a user stays, the better chances you have for a sale. Combine this metric with the page string a user visited and a heat map, and you'll have excellent information to help adjust your 'recommended products,' buyer personas, and finetune the website appearance.
Business Metrics
These metrics tie to your SaaS business model, revenue, and customer acquisition. They help you look out for business costs, margins, revenue, and ways to improve them.
4. Take Rate
This metric corresponds with your pricing model. It's the net revenue from fees and commissions. Usually, the numbers range from 5 to 30%. If you've followed the latest scandal between Epic Games and Apple, you might know that some buyers and sellers think 30% is too much. However, this is a metric that can indicate your exclusivity. At least, that's what it is for the App Store.
5. Gross Merchandise Volume (GMV)
While the number of marketplace participants is an excellent metric for showcasing your platform's size, accounting for spending is also critical. GMV shows the total cost of the sold goods within a timeframe.
6. Customer Acquisition Cost (CAC)
This dollar amount shows how much you spend on a consumer in marketing and support before they jump in. In the marketplace business model, CAC needs to be very low because the network should bring in new members by referral. If it does, you won't need to spend much.
However, we don't live in an ideal world: aggressive ad campaigns can happen, especially during the growth period. One example of this is the Wish marketplace launch campaign: their ads were everywhere.
7. Customer Lifetime Value (LTV)
This data point shows how much a customer spends from the first purchase until the last one. LTV is a bit tricky to pin down for a marketplace because you never know how long you'll be able to retain the customer and how many purchases they’ll make before they're gone.
While you're trying to estimate the LTV, keep in mind that it should be at least three times the CAC for sustainable business operation.
8. Contribution Margin
Subtract your variable costs from the sales to account for the contribution margin. This number indicates the profit on each product and helps you determine if you're breaking even. Divide that result by the sales amount, and you'll represent the number as a percentage of sales.
Both metrics make operational decisions more straightforward. For example, if one product brings you more profit than the other, you can decide to take advantage of it and promote it further.
9. Quick Ratio
There are two related quick ratio metrics: one for the number of users and the other for revenue. The first is calculated by adding new and resurrected users and dividing the result by the number of churned customers.
Suppose you're trying to calculate the quick ratio for revenue. Add the new, resurrected, and upgraded amount and divide the result by the lost revenue from cancellations and downgrades.
Both numbers help determine if the marketplace is growing.
Transaction Metrics
This category is where the buyer and seller meet. A marketplace is as strong as the relationship between customers and merchants. You have to monitor transaction metrics to get the most out of the community.
10. Liquidity
Marketplace liquidity is one of the most critical metrics. Once you've built the customer base, i.e., acquired sellers and buyers, you need to ensure they keep the platform active.
The higher the percentage of goods or services traded during a period, and the shorter the time you're accounting for, the better you're at liquidity. Different marketplaces need different approaches to this metric. While some might need to measure it monthly, others might need to address it every hour.
11. Average Order Value (AOV)
You get the average order value by dividing the total revenue by the number of transactions. This is a useful metric for benchmarking the overall per-transaction expenses.
12. Buyer-To-Seller Overlap
What's interesting in marketplaces is that many people can act as buyers and sellers simultaneously. You might get skewed results if you don't account for the overlap. If it's high, your customer acquisition cost falls. It happens because you get 'two participants' (a customer and a merchant) instead of one.
13. Buyer-To-Seller Ratio
Here is another marketplace-specific stat. It indicates the number of customers a provider can serve. This metric depends on the product or service that your platform specializes in.
This number can nudge you in the right direction during growth. The more buyers a seller can serve, the more you need to grow your provider list. On the other hand, if one merchant can serve one purchaser, you'll need to get more customers.
14. Repeat Purchase Ratio
This ratio is all about what percentage of the total transactions are repeat purchases from returning customers. Combined with the LTV, this statistic can determine how much you can spend on CAC.
Depending on your marketplace's specialization, you might need to calculate this statistic more often: daily, rather than monthly. Also, if there are a lot of lower-cost repeating transactions, the ratio will likely be higher.
User Satisfaction Metrics
As we've already established, marketplaces are networks of providers and customers. Here, dissatisfied customers might be the fall of your business. While new purchaser acquisition might be thrilling, SaaS marketplace owners need to take client retention seriously. If you want to retain customers, aim to understand them better.
15. Net Promoter Score (NPS)
You must be familiar with those surveys that ask, 'On the scale of 0 to 10, how likely are you to recommend our service?' NPS is the statistic those questions serve.
Calculate it by subtracting the detractor percentage (grades 0-6) from the promoter percentage (grades 9-10). The ideal result is close to +50%. Check this data point every couple of months and make changes to your customer service strategy, if needed.
Conclusion
Establishing and growing a marketplace is hard, and success can mean many different things for different platforms. However, one of the main factors for gaining momentum is riding the 'network effect.' Follow the metrics relevant to your marketplace to make it a welcome spot for the best buyers and sellers in your niche.
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